The “Archegos’ Loss Is Your Gain” Stock Market (And Sentiment Results)

Last week we spoke about opportunities starting to present themselves in selective Chinese Stocks and “Broken SPACs/SPAC warrants.”

On Friday, I joined Liz Claman on Fox Business.In this segment, I discussed two new positions – for the Summer – to take advantage of the recent dislocation in SAAS (Software as a Service) and Chinese Stocks. 

Over the past week we have been selectively, but aggressively, digging into a basket of Chinese stocks, SPACs/Warrants, and Selective Tech/SAAS stocks that we feel are getting overdone and should rebound nicely over the summer.

It wasn’t until today that I realized a number of the stocks I was adding happened to overlap with the same stocks that Archegos and the prime brokerages/banks were forced to liquidate in recent weeks – as the fund went bankrupt due to excessive leverage.

The natural sector/stock corrections were compounded by forced sellers – who sold billions of notional value in the following stocks that were used to hedge (the total return swaps) and now had to liquidate – as Bill Hwang’s family office unwound.  In other words, the bargains are steeper than they would have been due to the structural mechanics.  It seemed coincident until it clicked.

So what names got overdone from the unwind (Bloomberg)?  Chinese: IQiyi (IQ), Huya (HUYA), Alibaba (BABA), GSX Techedu (GOTU), Baidu (BIDU), Tencent Music Entertainment (TME), Vipshop (VIPS).  Other: ViacomCBS (VIAC), Discovery Communications (DISCA), Farfetch (FTCH).

These are especially interesting, not only because they are all trading at meaningful discounts relative to their 3-5 year outlooks, but also because they were top holdings of a guy who quietly turned $200M into a $20B personal fortune in less than a decade – largely betting on Asian stocks (peak wealth was $30B) (Bloomberg).

It worked until it didn’t.  Apparently, Archegos (the name of Bill Hwang’s Family Office) is a Greek word used in the New Testament to refer to Jesus.  Hwang should have known from his devout Christian studies that Jesus not only had to pay taxes, but apparently he had to pay margin calls as well…

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William K. 4 weeks ago Member's comment

Interesting.

Thanks for the article.